Magazine

The Oil Debate Goes On

March 16, 2003

-- CONSERVATION

John Carey's "Taming the Oil Beast" (Cover Story, Feb. 24) does an admirable job of identifying the complex set of issues and potential courses of action to limit America's growing dependence on foreign oil. I must take issue, however, with the proposal to use the Strategic Petroleum Reserve to dampen sudden price spikes. The U.S. government, in response to the 1973-74 Mideast oil embargo, created the SPR. The reserve's mission is to offset crude oil shortages caused by prolonged supply interruptions and relieve severe price increases accompanying these interruptions. Using the SPR as a mechanism to artificially lower short-term spikes in prices removes essential price signals from the marketplace and effectively works against conservation efforts.

Alan M. Herbst

Utilis Energy LLC

New York

During the Carter Administration, 10 states were involved in a pilot energy management/conservation program. I was a senior energy management engineer for the program in Connecticut. By the end of the program, it was clear that had what we learned been implemented nationally, the U.S. could have substantially reduced its imports of foreign oil. Unfortunately, one of the first things President Reagan did was to dismantle all the Carter programs on both energy management/conservation and alternative sources of energy.

George W. Earley

Mount Hood, Ore.

In the 1970s, it was known that the price paid for a barrel of Saudi oil was in two parts: approximately 50% was for the oil, the other 50% was an export tax on the oil. What was wrong with that? A domestic producer couldn't offer a deal like it. The U.S. oil-importing company got to claim a foreign tax paid on Saudi oil.

Ed Noyes

Bainbridge Island, Wash.

Until the Administration releases the minutes of the Cheney energy conference, I fear that your well-done review may be for a totally different world.

Bob Loring

Miami

-- RUNNING ROOM

We have about one auto or pickup for every adult, and despite our effort to improve mileage per gallon, this figure has declined about 5% over the past decade. Boosting mileage and raising fuel taxes are good ideas but will take enormous political courage. Drilling in the Arctic National Wildlife Refuge is not a bad idea. Coupled with other areas now off limits, increased sources of domestic oil will not solve our import problem but may give us time and flexibility until higher-mileage cars and more frugal motorists take the field.

If energy were taxed at the level it is in Europe, we would consume less. Tax revenues could be rebated through payroll taxes, so there would be no net cost to the economy from the tax itself. If our consumption of oil dropped from 20 million barrels a day to 15 million and the cost of oil dropped from $25 a barrel to $15, there would be a net gain of $100 billion to the economy. An energy tax/rebate plan could jump-start us toward economic, environmental, and homeland security, and OPEC would pick up a large part of the bill.

Geoff Berg

Warren, R.I.

I liked the concept of the costs of so-called externalities such as pollution or keeping troops and fighting wars in the Middle East. While you talked about a tax, how about just a sign at the pump: "Keeping our troops in harm's way in the Middle East costs 33 cents per gallon. Please conserve fuel"?

Bob Berg

Kingston, N.H.

Current environmental standards are reducing fuel efficiency in heavy-duty commercial trucks. A recent Environmental Protection Agency standard to reduce nitrogen oxides by 38% in heavy-duty truck engines actually increased fuel consumption in the range of 3% to 5%. Increasing fuel taxes, especially on commercial vehicles using diesel fuel, will have unintended consequences. Trucking companies operate on very slim profit margins of 3% to 5% in good years. Trucking companies would have no choice but to pass these costs along to their customers, causing them to ultimately show up in consumer prices.

Bill Graves, President & CEO

American Trucking Assns.

Alexandria, Va.

-- NO LACK OF ALTERNATIVES

Oil accounts for less than 3% of the nation's electric supply, and the oil used for that is largely of the variety ill-suited for applications such as transportation and home heating. Coal, nuclear, and hydro sources of electricity generation account for 80% of this country's electricity supply and by themselves greatly curtail oil use. Wind power, too, is related entirely to the electricity market. Any increase in the use of renewable electricity generation will not impact oil.

Mark T. Morey

Platts Research & Consulting/RDI

Washington

Editor's note: Platts, like BusinessWeek, is a unit of The McGraw-Hill Companies.

If the U.S. is to have adequate future power, a substantial share will have to come from coal. Our nation's 274 billion tons of coal is almost 95% of our recoverable fossil energy reserve. It is the energy equivalent of four times Saudi Arabia's oil, and it is the largest one-nation increment of energy in the world.

Jack N. Gerard

President and CEO

National Mining Assn.

Washington

-- ENERGY EFFICIENCY MADE EASY

Your sensible energy prescription becomes even easier and more profitable with four additions: 1) More than 200 uncounted "distributed benefits" make decentralized power sources about ten-fold more valuable (www.smallisprofitable.org). 2) Tripled- to quintupled-efficiency cars, like the uncompromised 99-mpg midsize SUV developed in 2000, needn't cost more: Ultralight materials and integrative design can make big savings cheaper than incremental ones (www.hypercar.com). 3) Such vehicles' lower propulsive load makes fuel cells small enough to afford even at early prices, permitting a rapid, profitable hydrogen transition using existing technology (www.rmi.org/images/other/HC-StrategyHCTrans.pdf). 4) Win-win policies such as revenue-neutral car "feebates" and rewards for scrapping inefficient cars can command broad bipartisan consensus (www.nepinitiative.org).

Amory B. Lovins, CEO

Rocky Mountain Institute

Old Snowmass, Colo. Your article on McDonald's ("Hamburger Hell," Corporation, Mar. 3) missed several very important positives about our company. When you realize that 46,000,000 people eat at McDonald's every day and that our business in 2002 netted nearly $1 billion in profits, clearly, we are doing an awful lot right.

By early April, we will be at the close of the first 100 days for our new leadership team, and we are committed to outlining even more specific business plans and priorities for revitalizing McDonald's at that time.

Whether it is attracting new customers or getting current customers to visit more frequently, we are taking several steps. Those include making sure our food tastes right, making the process of getting your food even faster, making sure we offer the right mix of foods, and making sure your order is right every time. Sure, McDonald's has talked about this before. But now we are doing more than talking. We are taking concrete steps to make it happen. I hope when you do the next big article on McDonald's, it will be headlined: "Hamburger Heaven."